What is a cartel?

Cartel conduct can result in higher prices and a reduction of choice and quality for consumers. Under the Commerce Act, businesses and individuals can face large fines if they have been part of a cartel or attempted to be part of a cartel. Individuals can be banned from running a company and face jail time of up to 7 years.

People can be part of a cartel in a number of different ways. Involvement in cartel conduct includes:

• entering into an agreement
• attempting to enter into an agreement
• carrying out the agreed conduct
• facilitating and aiding the agreed conduct.

If you intend to report cartel conduct to us, it is important to think about your circumstances and whether you are involved in the cartel conduct. This will help you to work out the best way for you to report the conduct to us. We have set out a number of helpful scenarios in the ‘What Next?’ section below.

Further information about cartel conduct can be found in our printable fact sheet, webinar and quiz.

Types of cartel conduct

Price fixing

Price fixing is where two or more businesses agree on what prices they will charge to avoid having to compete which each other. Price fixing is not limited to agreements between competitors setting a specific price for goods or services – it also includes competitors agreeing to fix any part of a price, or to set price according to an agreed formula.

Bid rigging

Bid rigging or collusive tendering occurs when there is an agreement among some or all of the bidders about who should win a bid. This may involve potential bidders not bidding for a tender to support the proposed winner or bidders may agree the prices that each party will bid. Such an agreement prevents open and effective competition and means procurers are unlikely to achieve best value for money for their business, customers, and in some cases, taxpayers.

Market sharing

Market sharing occurs when businesses collude to carve up markets and not compete for the same customers. This could be in relation to the sale of a specific product, a geographic area or a particular type of customer.

Restricting output

Restricting output is when two or more competing buyers or sellers agree to prevent, restrict, or limit the goods or services they are buying or selling or the goods or services that would likely be bought and sold.

How can I avoid cartel conduct?

• Make sure that you and your staff are familiar with the requirements of the Commerce Act. Keep records of who has attended training about the Act.
• Think carefully about who you are, or may be, in competition with, especially if sub-contracting is involved.
• Do not agree prices, discounts or any matters relating to price with your competitors (unless it is a specific sub-contract you are discussing).
• Do not agree to restrict output in any way, or to allocate customers or geographic markets between competitors.
• Do not exchange pricing, how much you plan to produce in the future, customer information or which markets you sell into with your competitors.
• If you are approached by another business to discuss pricing, allocating customers, bids for contracts or restricting outputs you should raise an objection straight away. Leave the discussion immediately and contact the Commerce Commission.
• Review internal documents, policies and procedures for compliance with the Commerce Act and seek independent legal advice.
• If you become aware of anti-competitive conduct, contact the Commerce Commission immediately.

We’ve created a quick guide to distribute within your business through your intranet or on your business noticeboard.

What next?

• If you or your business have been involved in cartel conduct, you can avoid the consequences if you’re the first to tell us about the conduct – find out more about reporting cartel conduct or read our Cartel Leniency and Immunity Policy.
• If you think you have seen cartel conduct, report it to us.
• If you are involved in procurement, we have created a fact sheet which gives guidance on what to look out for and what steps you can take to avoid being affected by cartel conduct.

• If you are in a trade or industry association, care must be taken to ensure that associations and individual members do not engage in cartel conduct. We have created a guidance fact sheet.

• There are some circumstances where cartel behaviour is allowed. Read our Competitor Collaboration Guidelines to find out more about exceptions and competitor collaboration, including applications for Collaborative Activity Clearance.
  • For further detail on exceptions, read this fact sheet.
  • To apply for Collaborative Activity Clearance, download an application form.

• We have developed guidance about how the Commission will approach business collaborations set up in response to an emergency which may contravene the Commerce Act, including cartel activity.

If you are unsure whether you fall into one of the above categories, get in touch with us by emailing contact@comcom.govt.nz.